[Income Tax] Breach Of Article 265 Cannot Be Alleged Based On Inconclusive Opinion By Assessing Officer: Bombay High Court

The Division Bench consists of Justices M.S. Sonak and Jitendra Jain stated that “If the communication dated 29 November 2018 is an order, it being like a preliminary, prima facie, or interlocutory order and not a final order, the Petitioner cannot base their claim on this communication to allege breach of Article 265 of the Constitution. The communication dated 29 November 2018 is based on preliminary verification and is subject to processing, and therefore, it is in the nature of a preliminary/prima facie/interlocutory order.”

In this case, the assessee/Petitioner engages in advertising and marketing communications in India and is a wholly owned subsidiary of Advertisement and Communication Services (Mauritius) Limited (ACSL Mauritius).

During the previous year relevant to the AY 2018-2019, assessee declared and paid a dividend to its shareholder ACSL Mauritius. The assessee paid Dividend Distribution Tax (DDT) under Section 115-O of the Income Tax Act, 1961 at an effective rate of 20.358%.

Therefore, claim for refund of excess DDT was made by a letter addressed to Assistant Commissioner of Income Tax. In the said letter, the assessee submitted that they were liable to pay DDT as per India-Mauritius Tax Treaty @ 5% only, however, they have paid DDT @ 20.358% and, therefore, they are entitled to claim refund of the excess DDT.

On 29 November 2018, Assistant Commissioner of Income Tax replied to the assessee's aforesaid refund claim. Thereafter, the assessee vide various letters requested the Assistant Commissioner of Income Tax to grant the refund along with interest based on the above communication dated 29 November 2018.

The Assistant Commissioner of Income Tax rejected the claim of the refund on the ground that reply dated 29 November 2018, based on which the refund is requested, is not a statutory order passed under the relevant Section of the IT Act and, therefore, effect cannot be given to such communication of 29 November 2018. It further states that no section is mentioned in the communication under which the same is passed, and no computation sheet is attached.

The communication dated 29 November 2018 cannot be treated as meaning that the Assessing Officer is satisfied as contemplated under Section 237 of the IT Act to the entitlement of the refund. Furthermore, since it is in the form of interlocutory/ preliminary/prima-facie communication, the same also cannot be considered an "order". The reading of the communication dated 29 November 2018 would only mean that prima facie, Respondent No.1 found the claim to be correct on preliminary verification, observed the bench.

The bench opined that since the communication dated 29 November 2018 does not specify conclusively the entitlement of the Petitioner to the refund claim, it cannot be considered as a final determination culminating in a final "order" under Section 237 of the IT Act admitting the entitlement to a refund of the excess DDT.

“we disagree with the reasoning in the impugned communication dated 16 June 2022 which states that since there is no mention of the Section in the communication dated 29 November 2018, the same does not constitute an order. Mere non-mentioning of any section would not mean that a communication finally determining the rights and liabilities of an Assessee cannot be treated as an order. However, there is no final determination in the case, and therefore, the essential attribute of a conclusive order is missing” stated the bench.

In view of the above, the bench allowed the petition.

Case Title: Fcbulka Advertising Pvt Ltd. v. Assistant Commissioner of Income Tax Circle 16(1)

Case Number: WRIT PETITION NO.3442 OF 2022

Counsel for Petitioner/ Assessee: J. D. Mistri

Counsel for Respondent/ Department: Tejinder Singh

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